Magpie Corporation uses the total cost concept of product pricing. Below is cost

Question

Magpie Corporation uses the total cost concept of product pricing. Below is cost information for the productionand sale of 60,000 units of its sole product. Magpie desires a profit equal to a 25% rate of return on invested assets of $700,000. Fixed factory overhead cost Fixed selling and administrative costs Variable direct materials cost per unit Variable direct labor cost per unit Variable factory overhead cost per unit Variable selling and administrative cost per unit $38,700 7,500 4.60 1.88 1.13 4.50 The unit selling price for the company's product is: a. $14.76 b. $15.80 c. $15.00 d. $13.82 The markup percentage on total cost for the company's product is: a. b. c. d. 1. 2 21.0% 22.7% 15.8% 24.0% 3. The dollar amount of desired profit from the production and sale of the company's product is a. $73,500 b. $96,000 c. $67,200 d. $175,000 The cost per unit for the production and sale of the company's product is: a. $12.88 b $12.11 c.. $13.50 d. $15 4.

Explanation / Answer

1) The unit selling price for the company's product is

Solution: $15.80

Working: (12.88 * 0.227) + 12.88 = $15.8

2) The markup percentage on total cost for the company's product is

Solution: 22.7%

3) The dollar amount of desired profit from the production and sale of the company's product is:

Solution: $175,000

Working: 700,000 * 0.25 = $175,000

4) The cost per unit for the production and sale of the company's product is:

Solution: 12.88

Working: (4.6 + 1.88 + 1.13 + 4.5)= 12.11

12.11* 60,000 = 726,600

726,600 + 38,500 + 7,500 = 772,600

772,600 / 60,000 = 12.88

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